Method of Sale in the Municipal Bond Market
Jun Peng, Ph.D. Associate Professor School of Public Administration and Policy Eller College of Management University of Arizona
Kenneth A. Kriz, Ph.D. Associate Professor at School of Public Administration University of Nebraska at Omaha
Tracy Neish Doctoral Student School of Public Administration and Policy Eller College of Management University of Arizona
Governments have to go through many steps to issue municipal bonds. The first step usually involves soliciting the advice of an independent financial advisor in structuring a potential issue. This involves setting the size of the issue and setting a general sketch of what the final bond issue will look like. Then the government must seek approval for the bond issue. Approval generally comes from one of two sources, the government’s legislative body (city council, county board, state legislature) or the people as a whole through the referendum process. Once the government bond has been approved by voters or the legislative body, the government issuer will then start the issuance process. There are many key decisions that must be made during this phase of the issuance process. One of the most important is the method of selling the bond. The decision’s importance stems from the fact that the method of sale will determine the responsibilities of most of the other key actors in the process.
In this chapter, we first discuss the chief differences between the two main methods ...